Jumia posts $25.5m profit in Q3 but records huge operating loss as market demand grows

Africa’s top e-commerce company, Jumia, during the third quarter of the year, posted an operational loss that more than doubled its profits.

According to the company’s Q3 earnings report, operating losses for the third quarter of 2021 rose to $64 million, a figure which is 250% larger than the quarter’s gross profits, which stood at $25.5 million. 

These figures are even as the company recorded a 5.7% decrease in year-on-year gross profit from Q3 2020.

Nonetheless, the company boasts of a growth acceleration during the third quarter of 2021 across all of its reported usage KPIs. 

Orders for the third quarter reached an all-time high of 8.5 million, accelerating the company’s growth by 28% year-over-year. This is its fastest growth rate of the past 7 quarters. 

According to Jumia co-CEOs, Jeremy Hodara and Sacha Poignonnec, the growth acceleration strategy initiated at the end of the second quarter of 2021 is starting to pay off. 

“Our growth acceleration strategy, initiated at the end of the second quarter of 2021 is starting to pay off. We are making investments in Sales & Advertising and Technology to further enhance consumer education, brand consideration as well as the relevance and convenience of our platform.”

The CEOs say the growth rate may not be instantaneous, but progress will be seen in profitability over the next few months. 

“We believe that these investments are long-term in nature and that accelerating growth will ultimately contribute to profitability, leveraging the strong efficiency gains achieved throughout 2020 and the first half of 2021. We are more confident than ever about the strong growth potential of our markets and our ability to build a growing business across e-commerce and fintech activities.” 

Accelerated growth boosted by increased active consumers

According to the report, active consumers increased by 8% year over year to reach 7.3 million in the third quarter of 2021. This is owing to a notable acceleration in new customer additions during the quarter.

FMCG was the fastest-growing category in terms of items sold, with the largest volume ever recorded, nearly doubling on a year-over-year basis. The strong momentum in the grocery sub-category is responsible for this gain.

Food delivery was the second fastest-growing category in terms of items sold, increasing by nearly 40% year over year. 

With over 2 million orders, food delivery set a new quarterly record, exceeding the previous mark set in the fourth quarter of 2020.

Increased advertising efforts

According to the company’s Q2 report, it spent $17.1 million on sales and advertising during the quarter, which increased to $24 million in Q3.

The company has increased its focus on sales and advertising, particularly through the use of popular online marketing channels such as Facebook and Google, as it strives to maximize the efficiency of these investments. 

However, as the report shows, the increased marketing spending, which resulted in significant losses, did not immediately translate into a huge gain in profit.

How did GMV fare?

The company’s Gross Merchandise volume GMV rose to $238.1 million, up 8% on a year-over-year basis and 9% on a constant currency basis from $223.5 million during the second quarter.

The report shows that consumer electronics and gadgets accounted for 36% of GMV in the third quarter of 2021, down from 43% in the previous quarter.

The fastest-growing area in terms of GMV was JumiaPay digital and financial services, which nearly doubled year over year thanks to significant growth in consumer financial services. 

FMCG was the second-fastest growing category in terms of GMV, with a year-over-year gain of over 50%, echoing the industry’s significant volume growth.

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